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TMI Blog2004 (9) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... International Airport. The goods sold in the DFS, it is stated, are the goods imported from foreign countries. It is the case of the petitioner that such sales at the arrival DFS falls under section 5(2) of the CST Act, 1956, as the sales were in the course of import being effected by transfer of documents of title to the goods before the goods crossed the customs frontiers of India and the sale at the departure DFS are in the course of exports and therefore the taxation authorities in the State of Kerala have no authority to impose levy, demand or collect tax in the said transaction. The petitioner has also got a case that respondents 2 and 3 who are also allottees of duty-free shops at Thiruvananthapuram have been granted exemption from payment of sales tax by the State of Kerala on the turnover of Here italicised. sale of goods effected by them at the DFS (extension counter) at the arrival halls in all international airports in the State. According to the petitioner it is also entitled to the same exemption by virtue of the provisions of section 10 of the Act. 3.. The airport authority of India has granted licence and permitted the petitioner to operate DFS at the arrival and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that the sale had actually taken place before the goods had crossed the customs frontiers of India as defined under the Act. As per the explanation, customs station and customs authorities are given the same meaning as in the Customs Act, 1962 (52 of 1962). However, the main part of the definition restricts to the area of customs station in which imported goods or exported goods are ordinarily kept before clearance by customs authorities. Thus it can be seen that the entire customs station are not included in the definition. The petitioner has produced exhibit P2 which is a circular issued by the Commissioner of Central Excise and Customs. The circular gives the details of the transaction made in a duty-free shop. The sales tax authorities cannot presume that the petitioner will adhere to the procedure made mention in exhibit P2 circular. On the basis of the circular the jurisdiction of the sales tax authorities to ensure that no tax legitimately due to the State exchequer is evaded cannot be ousted. Here also it is a matter of evidence. If the petitioner is able to establish that the transaction carried on by the petitioner is one entitling them to get exemption from s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner. 7.. The Senior Counsel further submitted that the order (exhibit P5) issued by the first respondent rejecting the petitioner's request for exemption under section 10 of the Act is arbitrary, irrational and is violative of articles 14 and 19(1)(g) of the Constitution of India. The Senior Counsel took me to the Government Order dated February 10, 2001 (exhibit P6) granting exemption to respondents 2 and 3 and submitted that the only condition imposed for the grant is that the consideration for such sale is paid in foreign exchange. The Senior Counsel submitted that if earning of foreign exchange is the object, the petitioner also is receiving the consideration for sale of the items in foreign exchange only. The Senior Counsel further submitted that if the exemption is limited to respondents 2 and 3 alone who are also having DFS in the same premises the passengers would naturally purchase goods only from the DFS which has got exemption from payment of sales tax. The Senior Counsel also submitted that exemption granted to the second and third respondents alone as per G.O. (P) No. 16/2001/PD dated February 10, 2001, etc., is also arbitrary, discriminatory and is liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution, in which State Government's interest is very much present by holding 26 per cent of the shares and the Minister's presence in the governing body. Taking into account the nature of the institution, Cochin International Airport Limited, it is a unique and pioneer venture in the country. To have an airport with the assistance of the public, Government wanted to see that this institution gets all concessions. The duty-free shop opened at Cochin International Airport was exempted, taking into account these factual position and the public interest involved. Whereas the petitioner is concerned, it is only a private entrepreneur and therefore, there is absolutely no comparison with this respondent to invoke the question of a discrimination, attracting article 14 of the Constitution." It is further stated in para 3 as follows: " 'The goods' stored and retained in the customs station/bonded warehouse, which is within the customs frontiers covered under section 2(a) and (b) of the Central Sales Tax Act, 1956 and is therefore, if the purchaser is importing the goods it is not a sale by the local dealer. The provisions say the goods ordinarily kept before clearance by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having a share holding of 26 per cent; besides, the Minister is a member of the governing body of the third respondent-company. The Special Government Pleader submits that exemption was granted to the second respondent in public interest. The Special Government Pleader also submitted that the third respondent is a fully Central Government owned company and that exemption was granted to the said company in public interest right from 1980 onwards. The Special Government Pleader also relied on the decisions in Mukut Dutta v. Anirban Purakayastha, C.T.O. [1998] 109 STC 559 (WBTT), North-24-Parganas District Pantiles Manufacturers Samity v. Commissioner of Commercial Taxes [1991] 82 STC 260 (WBTT), State of Uttar Pradesh v. Laxmi Paper Mart [1997] 105 STC 1 (SC), Loharn Steel Industries Ltd. v. State of Andhra Pradesh [1997] 105 STC 30 (SC) and other decisions in the matter. 11.. Sri. N.N. Sugunapalan, learned counsel appearing for the third respondent, on the basis of the averments made in the counteraffidavit submitted that there is a valid classification of dealers for the purpose of grant of exemption from payment of sales tax under section 10 of the Act and that the petitioner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds when they cross the customs barrier in the importing country. The Supreme Court referring to its earlier decision in State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205; AIR 1953 SC 333 as regards the limits of the course, observed thus: "It would seem, therefore, logical to hold that the course of the export out of, or of the import into, the territory of India does not commence or terminate until the goods cross the customs frontier." The Supreme Court in Gokal Co.'s case [1960] 11 STC 186; AIR 1960 SC 595 summarised the legal position vis-a-vis the importsale thus: "(1) The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the importing country after the goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import; and (4) a sale by an importer of goods, after the property in the goods passed to him either after the receipt of the documents of title against payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s but continues and is completed when the goods become part of the mass of goods within the country, the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed." 19.. Yet another decision of the Supreme Court in Kiran Spinning Mills v. Collector of Customs AIR 2000 SC 3448 in the context of levy of additional duty under the Customs Tariff Act particularly with reference to its earlier decision in In re, Sea Customs Act, 1878 AIR 1963 SC 1760; [1964] 3 SCR 787 observed that the taxable event occurs when the customs barrier is crossed. It was further observed that in the case of goods which are in the warehouse the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country. 20.. The exigibility to sales tax under the Act in respect of the sales turnover of goods effected by the petitioner at the arrival DFS as well as in the departure DFS of the International Airport at Thiruvananthapuram has to be considered in the light of the legal position settled by the Supreme Court in the aforementioned cases. 21.. I have already stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... import and that a sale by an importer of goods after the property in the goods passed to him either after the receipt of the documents of title against payment or otherwise to a third party by a similar process is also a sale in the course of import. It is also clarified that the import of goods into India is completed when the goods become part of the mass of goods within the country. The taxable event being reached at the time when the goods reached the customs frontiers and the bill of entry for home consumption is filed. This is further clarified that in the case of goods which are in the warehouse the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country. 24.. In view of the contention taken by the respondents the crucial question to be considered in the instant case is as to whether the goods brought to the duty-free shops at the arrival and departure DFS can be said to have become part of the mass of goods in the country. This is the matter which has to be considered by the authorities under the Act. 25.. Now I will deal with the second issue raised by the Senior Counsel, viz., exemption gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not clear as to whether respondents 2 and 3 have got any DFS at the departure counter of the International Airport at Thiruvananthapuram. According to the petitioner the only condition which is imposed in the notification is that the consideration for the sale of goods in the DFS is paid in foreign exchange. According to the petitioner the consideration for sale of goods in the duty-free shops of the petitioner is being received only in foreign exchange and therefore there is no justification for a differential treatment between the petitioner and respondents 2 and 3. It is their further case that the petitioner and respondents 2 and 3 fall in the same class in that all the three are conducting duty-free shops in the international airport at Thiruvananthapuram. In other words the contention of the petitioner is that the petitioner and respondents 2 and 3 will fall under a specified class, viz., persons conducting duty-free shops in the International Airport at Thiruvananthapuram. It is also their case that it is not as if there are a large number of DFS in the international airport, that the DFS conducted by the petitioner and respondents 2 and 3 are the only DFS in the Thiruvan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 and 19(1)(g) of the Constitution of India. 29.. The petitioner, admittedly, is a private concern which has contracted with the Airport Authority of India and the said authority had granted licence to the petitioner to operate duty-free shops at the arrival and departure launches of the terminal place at Thiruvananthapuram Airport for a period of 5 years with effect from March 27, 2003 subject to certain terms and conditions. The procedure for receipt and sale of articles at the duty-free shops situated inside the arrival/departure halls at Thiruvananthapuram Airport Terminal II is contained in the Circular No. 18/2003 dated August 14, 2003 (exhibit P2). The terms of the bonded warehouse licence and the permission to transship the cargo meant for DFS at Trivandrum International Airport under preventive Escort are contained in exhibit P3. The petitioner with reference to all these has submitted exhibit P4 representation seeking for sales tax exemption in respect of the turnover of sales effected in the duty-free shops at Thiruvananthapuram International Airport. The Government had rejected the said application simply stating that the request for sales tax exemption on the goods s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r special treatment" and that "the power of the Legislature to classify is of 'wide range and flexibility' so that it can adjust its system of taxation in all proper and reasonable ways". 32.. Going by the aforesaid principles laid down by the Supreme Court in the matter of discriminatory treatment between persons, as already noted, respondents 2 and 3 form a different class from that of the petitioner. If the Government in public interest has decided to grant exemption from payment of sales tax in respect of the turnover of sale of goods effected at the arrival duty-free shops (extension counter) at all international airports in the State subject to the condition that the consideration for such sale is paid in foreign exchange it cannot be said to be arbitrary or discriminatory as contended by the petitioner. Respondents 2 and 3 form a different class altogether. The petitioner cannot be equated with respondents 2 and 3 though all the three are conducting duty-free shops in the International Airport at Thiruvananthapuram. In the circumstances, the notification, exhibit P6, cannot be said to be illegal, arbitrary or discriminatory. It is declared accordingly. 33.. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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